HUDSON RIVER PARK TRUST Minutes of a Meeting of the Board of Directors at Spector Hall 22 Reade Street, New York, New York March 30, :05 PM

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1 HUDSON RIVER PARK TRUST Minutes of a Meeting of the Board of Directors at Spector Hall 22 Reade Street, New York, New York March 30, :05 PM Directors Present: Diana L. Taylor, Chair Alicia Glen, Vice Chair Karen Mintzer, representing Basil Saggos, Acting Commissioner, of the New York State Department of Environment Conservation Mitchell Silver, Commissioner, New York City Department of Parks & Recreation Leslie Wright, representing the Hon. Rose Harvey, Commissioner, New York State Office of Parks, Recreation and Historic Preservation Lawrence Goldberg, Esq. Pamela Frederick Michael Kuh Tom L. Pegues Jon L. Halpern Jeffrey Kaplan Joseph B. Rose Appearances: For the Hudson River Park Trust: Madelyn Wils, President & CEO Noreen Doyle, Executive Vice President Daniel Kurtz, CFO and Executive Vice President, Finance & Real Estate Amy Jedlicka, General Counsel Also Present: Gregory Boroff, representing Friends of Hudson River Park Daniel Miller, representing the Hudson River Park Advisory Council Other Trust Staff The Press The Public Chair Taylor noted that a quorum was present and called the meeting to order at 4:05 PM, noting too that all the members of the Board of Directors (the Directors or the Board ) had Pier 40, 2 nd Floor, 353 West Street, New York, New York 10014

2 received the Board meeting materials in advance. The first item was a resolution to approve the minutes of the January 26, 2016 meeting of the Board of Directors. Upon a properly-called motion, the following resolution passed unanimously. HUDSON RIVER PARK TRUST - Approval of Minutes of and Ratification of the Actions Taken at the January 26, 2016 Meeting of the Hudson River Park Trust Board of Directors RESOLVED, that the Minutes of the Meeting of the Hudson River Park Trust Board of Directors held on January 26, 2016 are hereby approved, and all actions taken by the Directors present at such meeting, as set forth in the Minutes, are hereby, in all respects, approved and ratified as actions of the Hudson River Park Trust, and a copy of such approved Minutes is hereby ordered filed with the records of Hudson River Park Trust. RESOLVED, that the President or her designee(s) be, and each of them is hereby authorized to take such action as the President or her designee(s) may deem necessary or appropriate in order to implement the foregoing resolution. **** The next item was a request for the ratification of determination that the proposed modifications to the Pier 57 Project will not have the potential to cause any significant adverse environmental impacts not previously identified in the February 2013 FEIS, and adoption of an Amendment to the Hudson River Park Multi-Purpose Project General Project Plan dated July 16, 1998, concerning the proposed use of Pier 57. President Wils explained that Pier 57 in Hudson River Park was the subject of a Request for Proposals issued on June 30, The Trust s Board of Directors conditionally designated Young Woo & Associates as the Pier 57 developer on July 23, Subsequently, the Trust and Young Woo began working together to advance detailed planning for the pier, including preparing an Environmental Impact Statement, undergoing ULURP for certain discretionary approvals under New York City s jurisdiction, and securing the required permits for in-water construction from the US Army Corps of Engineers and NYS DEC. Page 2 of 51

3 The ULURP process was completed in April 2013, and on July 25, 2013, the Trust, acting as lead agency pursuant to the requirements of SEQRA and the implementing regulations of NYS DEC, accepted a Final Environmental Impact Statement on the proposed Project and adopted SEQRA findings. Later in 2013, the Hudson River Park Act was amended to allow office uses at Pier 57, and to grant a lease term of up to 99 years subject to the agreement of the Governor, the Mayor, the Temporary President of the Senate and the Speaker of the Assembly, after consultation with local elected officials representing the project area. Such agreement was secured on October 27, In 2014, Young Woo announced its partnership with RXR Realty, a real estate owner, manager, and developer with significant experience restoring and repurposing historic structures. Young Woo and RXR also announced their intention to substitute office space for some of the previously approved retail space at Pier 57, as permitted by the amendment to the Act. Accordingly, the Trust undertook supplemental environmental review to assess the environmental effects from the introduction of office uses in place of a portion of the retail uses previously assessed, as well as some modifications to the interior and exterior of the pier and a change to the project s build year. That review, contained in a Technical Memorandum dated December 8, 2015, concluded that no significant adverse impacts would occur as a result of these modifications. Accordingly, no further environmental review is required. The Pier 57 project is now the subject of a proposed lease that is being separately presented to the Board for approval at this meeting. Authorization to enter into the proposed lease is contingent on the Board first adopting the amendment to the Hudson River Park Multi- Purpose Project General Project Plan dated July 16, The GPP governs permissible uses Page 3 of 51

4 within Hudson River Park pursuant to the Hudson River Park Act. In accordance with the Act, the proposed amendment to the GPP and the proposal to enter into a lease in excess of 10 years are subject to the Significant Action process described in the Act before the Trust s Board may consider either item. The Trust noticed the proposed GPP Amendment and proposed lease on December 17, 2015, when it published a Notice of Hearing and Public Comment Period on its website. The Public Notice contained links to the proposed lease and GPP Amendment, as well as to the comprehensive environmental review documentation conducted for Pier 57. In accordance with the Act s requirements, the Public Notice was published in the following places: the Trust s website; the City Record; the New York State Contract Reporter; the New York Post; and Chelsea Now. Additionally, and as required by the Act, the Notice was circulated to Manhattan Community Boards 1, 2 and 4; to the New York City Planning Commission; to the Hudson River Park Advisory Council; to local elected officials representing communities neighboring the Park; and to other interested community leaders, neighbors, partners and organizations. The Trust s public comment period remained open until February 16, Additionally, a Notice of Disposition of Real Property by Lease was also provided to the State Comptroller, the State Division of Budget, the State Senate Majority Leader, the State Assembly Speaker, the State Office of General Services and the State Authorities Budget Office in accordance with the requirements of the State s Public Authorities Law. The Trust presented the proposed project at several public meetings immediately before and during the public comment period. These included: meetings of Community Board 4 s Parks and Waterfront Committee on December 10, 2015 and January 14, 2016; a meeting of the Advisory Council on January 25, 2016; and a full Board meeting of Community Board 4 on Page 4 of 51

5 February 3, During these meetings, representatives from the Trust as well as from the Young Woo-RXR development team also answered questions from members of Community Board 4, the Advisory Council and the general public. As required under the Significant Action process, on January 20, 2016, the Trust also held a public hearing on the proposed GPP Amendment and lease. Several Board members were in attendance. In total, 25 commenters consisting of elected officials, organizations and individuals provided verbal or written comments during the Public Comment Period. All comments received as part of the Significant Action process, as well as the Community Board 4 resolution, were addressed in the Summary of Comments/Responses posted on our website, and provided to the Board. Although several comments were received concerning the proposed lease, as detailed in the Summary of Comments/Responses, no comments addressed the proposed GPP Amendment specifically. Plans for redevelopment of Pier 57 have been the subject of comprehensive environmental review. Following is a summary of that review process: In accordance with the SEQRA, a Draft Scope of Work was prepared and distributed for public review. A public scoping meeting was held on July 14, 2011, and written comments were also accepted until July 29, On October 10, 2012, the Trust posted the Final Scope of Work for the Pier 57 Redevelopment Project Draft Environmental Impact Statement. On October 25, 2012, the Trust issued a Notice of Completion and a DEIS for the project. A public hearing on the DEIS pursuant to SEQRA was held on January 23, Comments on the DEIS were accepted orally and in writing at that public hearing, and were submitted in writing directly to the Trust, acting as lead agency, until February 4, Page 5 of 51

6 On February 22, 2013, the Trust issued a Notice of Completion and the Final Environmental Impact Statement for the project. The Notice of Completion and FEIS were both posted on the Trusts website. On July 25, 2013, the Trust, acting as lead agency pursuant to the requirements of SEQRA and the implementing regulations of the DEC, accepted the FEIS for the proposed Pier 57 Redevelopment Project and adopted SEQRA Findings. Notice of the Trust s acceptance of the Final EIS was posted in the Environmental Notice Bulletin on March 6, The Statement of Findings was posted on the Trust s website. Subsequently, the Trust undertook supplemental environmental review to assess the environmental effects from the introduction of office use in place of a portion of the retail uses previously approved, as well as some modifications to the interior and exterior of the pier, and a change to the project s Build Year. That review, contained in a Technical Memorandum dated December 8, 2015 and posted on the Trust s website as part of the Significant Action process, concluded that no significant adverse impacts would occur as a result of these modifications. Accordingly, no further environmental review is required. The Trust seeks Board ratification of the Trust s determination that the proposed modifications to the Pier 57 project will not have the potential to cause any significant adverse environmental impacts not previously identified in the FEIS. As stated in the December 17, 2015 Public Notice, the current language in the GPP regarding Pier 57 reads, in its entirety: The municipal buses that now park on Pier 57 are scheduled to relocate to the Greyhound Terminal at Eleventh Avenue by Public walkways would be created along the Page 6 of 51

7 southern and northern sides of Pier 57 s headhouse to provide public access between the esplanade and the pier. In order to accommodate the new Pier 57 project as described in the proposed lease, Trust staff recommends replacing the current provision in the GPP regarding Pier 57 with the following language: Pier 57 would be redeveloped as a mixed use facility containing the following uses: cultural, educational and/or entertainment uses; general, professional, administrative and executive offices and ancillary uses; retail and restaurant uses; public access and public benefit uses including a perimeter public walkway, new public esplanades and a rooftop public open space; ancillary parking use; and maritime uses. The Trust seeks Board ratification of the Trust s determination that the proposed modifications to the Pier 57 project will not have the potential to cause any significant adverse environmental impacts not previously identified in the FEIS; and that the Board approve the adoption of the proposed amendment to the Hudson River Park GPP in the manner described herein, pursuant to the language set forth in the attached resolution. Upon a properly called motion, the following resolutions passed unanimously. HUDSON RIVER PARK TRUST Ratification of Determination that the Proposed Modifications to the Pier 57 Project Will Not Have the Potential to Cause Any Significant Adverse Environmental Impacts Not Previously Identified in the February 2013 Final Environmental Impact Statement and Adoption and Approval of the Proposed Amendment to the Hudson River Park Multi-Purpose Project General Project Plan RESOLVED, that based on the materials presented to the Board of Directors at its meeting on March 30, 2016, a copy of which is ordered filed with the records of the Hudson River Park Trust (the Trust ), that the Trust s determination that the proposed modifications to the Pier 57 project will not have the potential to cause any significant adverse environmental impacts not previously identified in the February 2013 Final Environmental Impact Statement is hereby ratified; and be it further RESOLVED, that the Board of Directors hereby adopts and approves an amendment to the Page 7 of 51

8 Hudson River Park Multi-Purpose Project General Project Plan dated July 16, 1998, such that the existing text regarding Pier 57 would be replaced in its entirety as follows: Pier 57 would be redeveloped as a mixed use facility containing the following uses: (1) cultural, educational and/or entertainment uses; (2) general, professional, administrative and executive offices and ancillary uses; (3) retail and restaurant uses; (4) public access and public benefit uses including a perimeter public walkway, new public esplanades and a rooftop public open space; (5) ancillary (but not transient) parking use; and (6) maritime uses. ; and be it further RESOLVED, that the President or her designee(s) be, and each of them is hereby authorized to take such actions as the President or her designee(s) may deem necessary or appropriate in order to implement the foregoing resolution. **** The next item was a request for determination of asset value and authorization to enter into a lease with Super P57 LLC for Pier 57. President Wils then explained that Pier 57 is located within the Park at approximately West 15th Street. The pier, which is listed on the State and National Registers of Historic Places, was historically used for the Grace Lines cruises (through 1967). Between 1967 and 2003, it was used as a bus garage and maintenance facility by the Manhattan and Bronx Surface Transportation Operating Authority, a subsidiary of the Metropolitan Transportation The Trust issued a second RFP on June 30, 2008 for lease and redevelopment of Pier 57. The RFP described the Trust s goals and objectives as follows: To attract a park-enhancing cultural, educational or commercial activity, or combination of the aforementioned. The goals of the development will include: creating a quality parkenhancing development for a combination of cultural, educational, recreational, maritime and/or other park/commercial (as defined in the Hudson River Park Act) and non-commercial uses; working with a capable, experienced developer to improve, operate and maintain the facility; providing an opportunity for park- and water-enhancing activities to expand the public s Page 8 of 51

9 enjoyment of the waterfront; and for restaurant, retail and other commercial uses in a new and exciting setting, while respecting the historic pier structure. The Trust received proposals in response to the RFP from the following three teams: Youngwoo & Associates, Related Companies, and Durst Organization with C&K Properties. The Trust s Board of Directors conditionally designated Young Woo as the Pier 57 lessee and developer, and authorized the Trust to negotiate with and enter into a Memorandum of Understanding with Young Woo on July 24, Pursuant to the Board s authorization, and following a period of due diligence investigation and document negotiation, the Trust and Hudson Eagle, L.L.C., an affiliate of Young Woo, entered into a Conditional Designation Letter on July 23, 2010 and subsequently the MOU on October 21, The MOU memorialized the terms and conditions of the proposed development, lease and use of Pier 57 which included: a non-traditional public marketplace to be managed by a qualified retail partner identified as an affiliate of Urban Space Management Inc.; other permissible retail and restaurant space; publicly accessible cultural, entertainment and educational uses; a perimeter waterfront walkway and newly constructed rooftop park that would host the annual Tribeca Film Festival or similar cultural festival; new public access walkways north and south of the pier headhouse; limited parking; and at the developer s sole election, boating and maritime recreational activities. The MOU anticipated the creation of rooftop park space, and the construction of new mezzanines on the ground floor and second floor, as well as new rooftop structures for retail use and all to be paid for by the developer. As anticipated in the RFP, the MOU provided for the use of historic investment tax credits to support rehabilitation of the pier. The MOU also identified Page 9 of 51

10 prohibited uses including, but not limited to, big box retailers, nightclubs, cabarets, trade shows, event and ballroom spaces. The MOU contemplated that Hudson Eagle would form a joint venture to realize the project. The MOU further provided, in part, that the original ownership percentages of the developer/lessee set forth in the MOU could be modified, subject to Trust s prior review and reasonable approval, upon a determination by Hudson Eagle that the modification materially enhanced the financial feasibility of the project. It also allowed for the substitution of Urban Space Management as the public marketplace manager subject to the written approval of the Trust. Following the execution of the MOU, the Trust and Hudson Eagle began working together to advance detailed planning for the pier, including commencing a multi-year analysis and public approval process. Among the elements included in this analysis and public approval process were: preparation of an Environmental Impact Statement; undergoing ULURP for certain discretionary zoning and other approvals by the New York City Planning Department and New York City Planning Commission; securing the required permits for in-water construction from the U.S. Army Corps of Engineers and State DEC; and developing preliminary, schematic, and design development architectural plans and drawings for the structure; and pursuing HTCs by making application to the Federal Historic Preservation Tax Incentives Program by demonstrating compliance with the Secretary of the Interior s Standards for Rehabilitation as approved by the National Park Service. President Wils, feeling unwell, then excused herself and Ms. Doyle continued. The ULURP process was successfully completed in April 2013, and on July 25, 2013 the Trust, acting as lead agency pursuant to the requirements of SEQRA and the implementing Page 10 of 51

11 regulations of DEC, accepted a Final Environmental Impact Statement on the proposed Project and adopted SEQRA findings. In June 2013, the Hudson River Park Act, which governs both the Park and the Trust, was amended to allow office uses at Pier 57; the amendment also permitted the grant of a lease term of up to 99 years at Pier 57, subject to the agreement of the Governor, the Mayor, the Temporary President of the State Senate and State Assembly Speaker, after consultation with local elected officials representing the project area. A memorandum of understanding evidencing that agreement to the 99 lease term was secured in late 2015 and is available on the Trust s website. In 2013, Hudson Eagle entered into a joint venture agreement with funding entities associated with The Baupost Group, LLC as qualified institutional investors, and the MOU was duly assigned to the JV. Subsequently, the project encountered significant development challenges resulting in substantial negotiations between the MOU parties to enable the Trust to achieve the objectives set forth in the MOU. As a result, in 2014, Young Woo and Baupost announced a partnership with RXR Realty, a real estate owner, manager, and developer with significant experience restoring and repurposing historic structures, including the nearby Starret- Lehigh building. Following the announcement, the JV agreement was amended and restated to admit RXR as managing member and the JV was renamed P57 Investors LLC, with Young Woo as the member specifically undertaking marketing and management responsibilities for the retail component of the project. Under the terms of the MOU, the Trust accepted the amendment and assignment of the MOU to reflect this expanded JV structure. The structure also created, for HTC purposes, an entity known as Super P57 LLC to assume responsibility for the future development of the project as the Trust s prospective tenant under the agreement of lease for the Page 11 of 51

12 Pier 57 real property and improvements that would be entered into pursuant to the RFP and the MOU. Tenant Super P57 LLC is 99% owned by P57 Investors LLC. In 2014, Super P57 LLC announced its intention to pursue the commercial office use permitted under the amendment of the Act by substituting office space for the retail uses previously contemplated on the third and fourth floors of the rehabilitated pier. Accordingly, the Trust undertook a supplemental environmental review to assess the environmental effects from the introduction of office use in place of a portion of the retail uses previously assessed, as well as some modifications to the interior and exterior of the pier and a change to the project s build year. That review, contained in a Technical Memorandum dated December 8, 2015 and posted on the Trust s website, concluded that no significant adverse impacts would occur as a result of these modifications. Accordingly, no further environmental review is required. In late 2015, Super P57 LLC advised the Trust that it had a pending sublease for the office space with Google, Inc., a prominent technology company. Upon execution of the proposed Lease the Trust will recognize the Google sublease with Super P57 LLC and provide Google with a non-disturbance agreement. Also in late 2015, Young Woo, P57 Investors LLC, the member responsible for retail marketing and management of the project, indicated that it, together with RXR, was in advanced negotiations to sublease most of the first and second floor space to a newly formed entity led by Anthony Bourdain, a well-known culinary expert, for an innovative food and restaurant market. Super P57 LLC has confirmed that this Bourdain World Market will be a public marketplace with a combination of fixed retail and smaller kiosks, incorporating some container market elements in its design. It will also incorporate cultural, entertainment and educational uses within the subleasehold to satisfy the MOU and Lease requirement. Upon execution of the Page 12 of 51

13 proposed Lease, the Trust will conditionally approve the Bourdain sublease with Super P57 LLC subject to review of further documentation. Super P57 LLC has informed the Trust that it remains in active negotiations with Tribeca Film Festival and is securing a long-term commitment from TFF to hold an outdoor portion of its annual festival and a limited number of additional events on the rooftop, in a manner generally consistent with the original Young Woo RFP submission and the proposed Lease. TFF festival and events on the rooftop of Pier 57 would be free and open to the public and frequency is controlled by the proposed Lease. Finally, at the end of 2015, Super P57 LLC further informed the Trust that it had secured commitments from: PNC Bank, N.A. as lead institutional lender to provide construction financing, and PNC Investment Company LLC as HTC investor to provide additional equity. PNC is one of the largest banking institutions in the United States. Under the pending HTC investment transaction, Super P57 LLC is to enter into a master sublease with an entity 99% owned by PNC Investment Company LLC and managed by P57 Investors LLC, to enable pass through of the HTCs. Under both the construction loan and HTC transaction, RXR affiliates will provide financial guarantees. As is more particularly described below, Trust staff has concluded that the Lease proposed for approval by the Board will enable the Trust to achieve the goals and objectives of the RFP detailed above. The proposed Lease premises are the real property and improvements located on Pier 57 at 15th Street in the Park, a/k/a 25 11th Avenue, New York, New York. The Premises consist of the pier structure, the historic Pier 57 building, and certain adjacent in-water areas included within Tax Block 662, Lot 3. The proposed Lease also includes temporary and permanent Page 13 of 51

14 easements associated with the construction, operation and ongoing care of the Pier 57 building and the portion of the public perimeter walkway to the north and south of the pier head house, new pile supported public esplanades to the north and south of the Pier 57 building, and driveways, pedestrian walkways, and other areas to the east, north and south of the Pier 57 building. The easements extend generally to the north to 17th Street extended and to the south to 14th Street extended, and include the areas from the western boundary of the Rte. 9A bikeway to the eastern facade of the Pier 57 building and westernmost edges of the perimeter walkway to the north and south of the pier head house and newly constructed esplanades to the north and south of the Pier 57 building. The site area, inclusive of lands underwater and excluding the easement area, is approximately 327,385 square feet. The gross floor area of the existing Pier 57 building, excluding the basement caisson areas and prior to rehabilitation, is approximately 387,850 SF. Including the basement caisson areas, the GFA of the existing Pier 57 building is approximately 448,921 SF. The Premises may also include certain additional in-water areas to the north and/or south of Pier 57 for a potential marina if Tenant exercises its option(s) within a 10 year period from the commencement of the Lease. Tenant Super P57 LLC, a Delaware limited liability company, is 99% owned and controlled by managing member P57 Investors LLC, a Delaware limited liability company, which is in turn owned by affiliates of the Young Woo, RXR and Baupost parties to the MOU. A master subtenant, RXR Pier 57 MT LLC, which is 99% owned by PNC Investment Company LLC and managed by P57 Investors LLC as 1% managing member, has been created to enable PNC to receive the benefits of the HTCs as contemplated by the RFP and the MOU. Page 14 of 51

15 The Trust would consent to the Master Sublease structure and agreement and further agree that, in the event of a material default under the proposed Lease, the Trust would forbear from any exercise of its rights and remedies thereunder that could preclude the HTC investors from receiving the tax benefits or cause a recapture of those tax benefits. The forbearance period would expire when the tax credit investors are no longer subject to the recapture of tax benefits or when recapture occurs for reasons other than any action of the Trust. Under the terms of the proposed Lease, the Premises could be used solely for: cultural, entertainment and educational uses; general, professional, administrative and executive offices and ancillary uses; retail and restaurant uses, including a public marketplace; public access and public benefit uses, including a perimeter public walkway, new public esplanades and a rooftop public open space; ancillary (but not transient) parking use; and maritime uses. The proposed Lease contains certain minimum and maximum square footages associated with certain of these Permitted Uses, and in addition, identifies generally the locations within the Premises of Permitted Uses. The free Tribeca Film Festival is permitted on the rooftop public open space during certain specified dates in March, April, May and/or October. Limited additional event and educational uses, free and open to the public, will also be permitted on the rooftop public open space, but the frequency and terms of such use are controlled as defined in the proposed Lease. Prohibited uses include retail establishments such as big box retailers and nightclubs/cabarets. Further, the Lease provides that occupants shall not include tenancies or uses that: consist primarily of trade shows, event space and/or ballroom businesses and similar uses; or are incompatible with the Park uses as set forth in the Act. Page 15 of 51

16 The proposed Lease obligates Tenant, at its sole cost and expense, to maintain, repair and take good care of the Premises and the easement areas, including but not limited to the bulkhead and all other in-water structures. The most recent estimate of the total hard costs, soft costs, financing costs and construction interest to be incurred by Tenant is approximately $327.3 million. This total does not include rent due the Trust under the proposed Lease during the construction period or costs associated with securing the HTC investment. Because the Pier 57 building is on the National Register of Historic Places, Tenant must hire an historic building procedure consultant in furtherance of the historic preservation objective of the project. Tenant must perform rehabilitation work and all repairs, maintenance and alterations to meet the Secretary of the Interior s Standards for Rehabilitation as set forth in the Historic Preservation Applications approved by the National Park Service. According to the most recent Permitted Use plans, the Pier 57 building will contain, upon completion of construction, approximately 397,323 SF of interior GFA for space subtenants, approximately 14,592 SF of commercial terraces, approximately 9,060 SF of ancillary parking, approximately 53,476 SF of support space, and approximately 57,241 SF of pedestrian circulation space. Rentable area of the entire Premises upon completion of construction is approximately 486,963 SF. The project creates a significant amount of new public open space. The perimeter public open space walkway will encompass approximately 34,290 SF and the rooftop public open space approximately 80,285 SF on two levels. Within the easement area lie approximately 10,795 SF of new public open space esplanade and approximately 10,048 SF of pedestrian public open space walkway. Total public open space is therefore approximately 135,418 SF, or 3.1 acres. Page 16 of 51

17 In addition to the elements discussed above, Tenant has assumed responsibility for the maintenance, repair and ultimate replacement of approximately 940 linear feet of Hudson River bulkhead and associated marine relieving platform structure located within the Premises and easement area. But for the proposed Lease, the maintenance, repair and replacement of this bulkhead, constructed in 1905, would be the responsibility of the Trust. The replacement cost for this structure, inclusive of hard and soft costs, is approximately $19,500 per linear foot. Including restoration of adjacent upland, the total value of bulkhead replacement is estimated at approximately $20 million. The replacement cost of that portion of the bulkhead in the easement area that does not directly front on the Premises is approximately $11.4 million. These figures are not carried in Tenant s development cost estimate as they will not be incurred until some period after completion of the project. Ms. Doyle concluded speaking and President Wils resumed by explaining to the Board that the proposed Lease has a 60 year term, with one renewal option of 20 years and one renewal option of 17 years, for a maximum total term of up to 97 years. The proposed Lease identifies a total of six types of rent payable to the Trust: construction period rent, base rent, in-water areas rent if Tenant exercises the in-water option(s), participation rent, transaction rent, and payments in lieu of taxes, known as PILOT, rent. The Lease sets forth the manner of payment and amounts of each rent type. A payment of $6,500,000 for construction period rent is due at Lease execution. Additional construction period base rent is due at the quarterly rate of $187,500 if construction is not completed within 24 months. Base rent commences within the earlier to occur of: the date that is thirty (30) calendar months after the Lease execution, the date upon which the payment of rent commences under the Page 17 of 51

18 sublease with Google, and the first date on which not less than sixty percent (60%) of the building is leased and tenants are open for business. At base rent commencement, Tenant shall pay $6,453,394 per annum - $7 million less amounts previously remitted to the Trust for certain interim events. Thereafter, Tenant will pay annual base rent of $1 million, increasing 10% every five years until year 21, at which point annual base rent is reset to $2,928,200 increasing 10% every five years to year 45, and then 15% every five years to year 55. If Tenant exercises options to extend/renew at years 60 and 80, the annual base rent for those years is reset at the greater of appraised fair market rent or sums of prior year base rent plus participation rent. During renewal periods, five year escalation are equal to the greater of CPI during the five year period preceding the renewal period, and 15%. In-water rent is set by appraisal at fair market rent should Tenant exercise the option to add the in-water portion to the Premises. Participation rent of 5% of effective gross income is paid after the project has first generated a threshold Cash on Cost return of 11%. The participation rent is payable, on an annual basis once Tenant s effective gross revenue, less permitted operating expenses, capital reserves, PILOT, and base rent, exceeds the participation rent Cash on Cost threshold. Transaction rent is payable as 1.25% of adjusted net proceeds of the first assignment, and 1.5% of subsequent assignments or refinance transactions that occur after the 5th year of operations. PILOT rent is payable based on a modified version of the New York City 25-year Industrial and Commercial Assistance Program schedule. Minimum PILOT rent is paid based on a graduated schedule during the first 20 years, with additional amounts due starting the eighth year of operations. PILOT rent equal to full taxes is payable from the 26th year of operations Page 18 of 51

19 onward. To the extent that PILOT rent actually paid in a lease year is less than PILOT rent otherwise due under the modified ICAP schedule, that amount is accrued with interest at 3% and the deferral balance then amortized and paid as additional PILOT rent during years of operations at 5.5% interest. Ms. Wils then noted that, as with the previous board item, the proposed lease is considered a significant action under the Act, subject to public hearing and comment before finalization and subsequent Board approval, as detailed moments prior. The President noted that the significant action procedures were the same as the previous board item and continued to describe that the proposed Lease is a negotiated disposition under Section 2897 of NYS Public Authorities Law ( NYSPAL ) which applies to any real property disposed of by lease for a term of more than five years if the total estimated rent over the term of the lease is in excess of $100,000 for any of such years. In accordance with the relevant provisions of NYSPAL, the Trust secured the services of a qualified independent appraiser to determine the fair market value of the Premises based on the terms of the proposed Lease. The Appraisal, a copy of which has been provided to the Board and is posted on the Trust s website and included in the procurement record, established the fair market value of the property, unencumbered by the proposed Lease (the effective fee simple interest) at $95 million. Without consideration as to the value of the PILOT rent, new open space to be constructed and Park bulkhead replacement, all of which are obligations of the Tenant under the Lease for the benefit of the Trust, the present value of construction rent, base rent, and participation rent under the Lease is estimated to be $71 million pursuant to the Appraisal. Accordingly, under the most conservative interpretation of value received by the Trust (i.e., one Page 19 of 51

20 that excludes PILOT rent and the value of items constructed/responsibility assumed by Tenant on behalf of the Trust), the negotiated disposition pursuant to the proposed Lease would be for less than fair market value. Under NYSPAL Section 2897(7)(ii), the disposition of real property by negotiation for less than fair market value is permissible if its purpose is within the purpose, mission or governing statue of the Trust and certain enumerated information is provided to the Board. The following information identifies this requirement and explains how each is satisfied: The proposed Lease is within the mission, purpose and governing statute of the Trust in that it will, among other factors set forth in the Act: enhance the ability of New Yorkers to enjoy the Hudson River, increase the quality of life in the adjoining community, boost tourism and stimulate the economy, and help fulfill the plan for the development of Hudson River Park. As previously noted when describing the Premises, this is pursuant to the furnished Appraisal and the further explanation of fair market value about to be addressed. The effective fair market value fee simple interest is established by the appraisal at $95 million. The valuation date is December 1, Subsequent to the initial determination of value, the appraiser was informed of an additional negotiated provision that increases PILOT rent payable to the Trust during the 8th through 20th year of operations. This additional value was calculated and included in an Addendum to the Appraisal. The increase does not affect the fair market value fee simple interest valuation. Description of the purpose of the transfer, and a reasonable statement of the kind and amount of the benefit to the public resulting from the transfer, including but not limited to the kind, number, location, wages or salaries of jobs created or preserved as required by the transfer, the benefits, if any, to the communities in which the asset is situated as are required by the Page 20 of 51

21 transfer. The purpose of the transfer is to lease the Premises to Tenant, a capable, experienced developer to create a quality park-enhancing development at the Premises generally as a mixed use facility with retail, office, cultural, entertainment and educational uses and public open space, among other uses, as described above, in a manner that preserves the historic character of the pier and the building and creates new public open space accessible by the public for the enjoyment of the waterfront. The benefits to the public are as follows: restoring historic Pier 57 to beneficial use after more than 12 years of disuse; significant improvements to Pier 57, the Premises, and the easement area which include but are not limited to the construction, repair, maintenance of new public open space including new pile supported public waterfront esplanades; the maintenance and repair of bulkheads and certain other Park infrastructure; the construction, maintenance, repair and operation of new rooftop park space, all of which performance and cost obligations would otherwise be the responsibility of the Trust; and the creation of new restaurant, retail and other commercial uses in a new and exciting waterfront setting; the creation of approximately 550 construction jobs and approximately 2,000 new parttime and full-time job opportunities at the proposed mixed-use facility, including retail, office and maintenance, security and operations jobs; and the creation of a substantial source of revenues to the Trust under the proposed Lease which will help fund the Trust s annual operating expenses, all in furtherance of its statutory mandate under the Act. The present value of construction rent, base rent, and participation rent (but excluding PILOT rent) received under the proposed Lease is estimated to be $71 million as established by the Appraisal. The present value of PILOT, a type of rent under the proposed Lease and retained by the Trust, is estimated to be $134 million as established by the Appraisal as of the December 1st valuation date included in the ABO Notice. Subsequent to the December 1st valuation date, a Page 21 of 51

22 negotiation with Tenant resulted in an increase of $12.9 million in the present value of PILOT rent, as is set forth in the Addendum to the Appraisal. The total present value of monetary rent, inclusive of construction rent, base rent, participation rent and PILOT rent is therefore $217.9 million as established by Appraisal, compared to the effective fee simple interest fair market value as established by the Appraisal of $95 million. The non-monetary construction value of new open space provided by Tenant for use by the public that forms part of the consideration under the proposed Lease is approximately $14.8 million. The replacement cost for Park bulkhead not situated within, or fronting on, the Premises, and for which Tenant assumes responsibility under the Lease, is approximately $11.4 million. The total present value of monetary rent (excluding PILOT rent) plus non-monetary construction value is $97.2 million; and the total present value (monetary rent including PILOT rent and non-monetary construction value) to be received by the Trust is approximately $244.1 million. These present value totals compare to the effective fee simple interest fair market value as established by the Appraisal of $95 million. As previously noted when describing the Tenant, the Trust received offers from two other private parties under the RFP: Durst Organization with C&K Properties, and Related Companies. Both proposals sought to use Pier 57 for a mix of cultural and commercial purposes with in-water elements. Applying a lower discount rate to calculate present value from that used in the Appraisal, the monetary offers (including PILOT) of the lease term were estimated at approximately $176.8 million for Related Companies and $51.4 million for Durst Organization with C&K Properties for the 2008/2009 offers. Related subsequently withdrew its proposal. Durst Organization and C&K Properties declined to make a complete financial submission, citing market uncertainties. Page 22 of 51

23 The proposed Lease has been the subject of years of extensive planning, negotiations, public review and approvals. The only alternative to proceeding with the proposed Lease would be to issue a new RFP and seek a new tenant. Under such an alternative there is no reasonable assurance that HRPT would achieve the same benefits as under the proposed Lease, or that it would receive equivalent or better long and short term revenues, redevelopment investment value, creation of 3.1 acres of public open space, and other significant benefits offered under the proposed Lease, including without limitation those construction, repair, maintenance and operation obligations, the performance and cost of which would otherwise be the responsibility of the Trust. Development leases on public property in Manhattan typically involve long-lead predevelopment periods and include financial and organizational adaptations, either before or after lease commencement, and/or substantial government capital support. The amount of time from RFP to Board approval of the proposed Lease, while significant, is not unusual for such a complex project. Moreover, for most development leases involving public waterfront property in Manhattan, either no PILOT is included, or PILOT does not commence for many years after lease execution. Since the Trust does not have ready access to government support capital, and the timely completion of the Park for the benefit of the public is of paramount concern to the Trust, the issuance of a new RFP would generate a high degree of risk to the Trust given the scope of the redevelopment project and uncertainties of the then-prevailing market economy. For these reasons, there is no reasonable alternative to the proposed below-market transfer by lease that would achieve the same purpose of such transfer. Staff hereby requests that the Board adopt the determination set forth in the attached resolutions that there is no reasonable alternative to the proposed below-market transfer pursuant to the proposed Lease that would achieve the same purpose as such transfer and approve and Page 23 of 51

24 authorize the execution of the proposed Lease between the Hudson River Park Trust and Super P57 LLC for Pier 57, a copy of which has been provided to the Board and posted on the Trust s website. Director Rose asked the actual cash flow projections for the rent over the next incremental periods. Mr. Kurtz explained that the Trust has no maintenance responsibilities and no expenditure responsibilities for the project at this stage. There are no significant piles to repair because the pier is supported by caissons and the developer is assuming full responsibility for the maintenance and the ultimate replacement of the bulkhead. Per Mr. Kurtz, with respect to rent, there is a minimum that consists of both the PILOT and the rent. And that runs at approximately $1.5 million to $1.7 million in the first year and goes to approximately $4 million in the tenth year. By the twentieth year, the number approaches approximately $7 million to $8 million. When asked by Directors Rose and Glen about percentage rent, Mr. Kurtz responded that the percentage rent calculation is performed on an annual basis based on the net operating income of the project to the extent that that is in excess of an 11 percent threshold of the net project value, which is basically the project cost. To the extent that it exceeds that amount, participation rent is payable at five percent of gross. So that would include the revenue generated by the office tenant, which is relatively assured in this instance, and the revenue generated by the retail tenant, which has a higher risk involved. Then when further questioned by Director Halpern regarding the project s net operating income, Mr. Kurtz noted it is net of operating expenses only, net of any other non-cash expenses such as depreciation and debt service; he referred the Directors to the appraisal for the conservative approach to the expected timing for receipt of percentage rent. Page 24 of 51

25 When asked further by Director Halpern about supporting credit enhancement during the historic tax credit recapture period, Mr. Kurtz explained that if there is a shortfall, there are two levels of protection: PNC is required to draw on the RXR guarantee, and then secondly, with respect to funds that are received from the RXR guarantor, Hudson River Park, as the landlord will receive what are called the must pays. The must pays consist of all PILOT, base rent, participation rent, and all other forms of rent including sufficient funds to maintain all of the public open space. In the unlikely event that RXR is no longer the managing member of the Tenant, the Trust has negotiated separate guarantees running directly to the Trust such that eventually the guarantee goes directly to the Trust. There's a negotiation period between three to five years, depending on where the project is at that particular point. Thus, if an entity has fallen out of ownership of the Tenant or there's some distress in the project, the Tenant would have a three to five year period to solve the problem. And during that period, the Trust would be receiving all of its rent and there would be an assurance that there are sufficient funds to pay for the public open space. There being no further questions, upon a properly called motion, the following resolutions passed unanimously. HUDSON RIVER PARK TRUST Determination that There Is No Reasonable Alternative to the Proposed Below Market Transfer by Lease Between the Hudson River Park Trust and Super P57 LLC for Pier 57 RESOLVED, based on the materials presented to the Board at its meeting on March 30, 2016, a copy of which is ordered filed with the records of the Hudson River Park Trust, the Directors hereby determine that there is no reasonable alternative to the proposed below market transfer by lease between the Hudson River Park Trust and Super P57 LLC for Pier 57 that would achieve the same purpose as such transfer; and be it further Page 25 of 51

26 RESOLVED, that the President or her designee(s) be, and each of them is hereby authorized to take such actions as the President or her designee(s) may deem necessary or appropriate in order to implement the foregoing resolution. HUDSON RIVER PARK TRUST Approval of and Authorization to Enter into a Lease Between Hudson River Park Trust and Super P57 LLC for Pier P57 RESOLVED, based on the materials presented to the Board at its meeting on March 30, 2016, a copy of which is ordered filed with the records of the Hudson River Park Trust, the Directors hereby approve and authorize the execution of the proposed Lease between the Hudson River Park Trust and SuperP57 LLC for Pier 57; and be it further RESOLVED, that the President or her designee(s) be, and each of them is hereby authorized to take such actions as the President or her designee(s) may deem necessary or appropriate in order to implement the foregoing resolution. **** Members of the Board then acknowledged the work and efforts of Trust staff in seeing this project to its conclusion, recognizing the many months and complexities of the project. Director Taylor invited Seth Pinsky to speak. Mr. Pinsky thanked the Board and, speaking on behalf of RXR and Young Woo, affirmed their enthusiasm for the project. Chair Taylor then noted that the entire Board is very pleased with this enormous milestone that has the support of the communities and the people that it will benefit, and then turned to Vice Chair Glen for comments on behalf of the City. Vice Chair Glen said she wanted to think of it as something that's transcending politics and transcending administrations in this long struggle; to see this deal come together is really a terrific moment for the City of New York. She noted that, again, it's such a win-win for the City because this site is able to be activated in a way that will create open space and amenities for New Yorkers for generations to come. Vice- Chair continued it's going to be great for foodies and, of course, anything and everything that can be done to support the growth of the tech ecosystem in New York is extraordinarily important as we continue to diversify our economy. To do it in a way that also benefits the Trust and the Page 26 of 51